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The Institute for Supply Management’s (ISM) monthly Non-Manufacturing Report on Business for October was down slightly from October but remained firmly in growth territory.

The index ISM uses to measure non-manufacturing growth—known as the NMI—was 54.2 in October, down 0.9 percent from September and even with the 12-month average of 54.2. A reading above 50 represents growth. With the October NMI remaining above 50, economic activity in the non-manufacturing sector has grown for the last 34 months, according to ISM. The PMI, the index on which the ISM’s Manufacturing Report on Business is based on, increased 0.2 percent to 51.7 in October, marking the second consecutive month it has had been above 50, following three straight months of declines.

The report’s four core metrics were mixed on a sequential basis in October. Business Activity/Production was down 4.5 percent at 55.4, and New Orders were down 2.9 percent at 54.8. Employment was up 3.8 percent at 54.9.

“Employment is what has kept the NMI where it is, less than 1 percentage point down,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “The nearly 4 percent uptick really helped out overall. Even with the seasonal adjustment in employment figures, we do see a retail spiked evident with the retail index.”

When asked about the 4.5 percent dip in Business Activity/Production, Nieves attributed that to some hesitancy out there on the behalf of ISM respondents about tomorrow’s Election, which he said is reflective of the “wait and see what happens” outlook taken on by many.

Despite the drop-off, Nieves stressed that this still shows a strong sequential growth rate.

October Supplier Deliveries were flat at 51.5 and Inventories dropped 2.0 percent to 46.5.

“Deliveries are slowing month over month at the same rate,” he said. “In actuality, we had slightly slower deliveries over 50, which are slowing at the same pace or rate. What we might see impact us next month are the after-effects of Hurricane Sandy, considering its impact on ports and trucking in the Northeast corridor. Unlike Katrina, which was in the Gulf, this is more of a commerce hub.”

Prices saw a 2.5 percent drop in October to 65.6. Fuel and gasoline prices fluctuated throughout the month, which Nieves said is a timing issue as it relates to buying patterns for those commodities. This impacts things like trucking rates and fuel surcharges, and production costs, he explained.

When comparing the first ten months of 2012 to the first ten months of 2011, Nieves observed that the employment picture is slightly better in 2011, with confidence subsequently increasing, too.

“There is a bit more optimism now,” he said. “But it is a guarded optimism. A year ago, things were more mixed to a degree.”

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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